This means they have the same per individual £50,000 cover as any UK bank, under the Financial Services Compensation Scheme (FSCS).

Previously, Post Office savings had fallen under the Irish compensation scheme because the accounts are held at Bank of Ireland. But the bank transferred all Post Office savings to a new UK subsidiary called Bank of Ireland UK on 1 November.

In January 2011, this will change to the equivalent of '100,000 - currently around £84,000 - when the UK falls under the new European compensation scheme.

What about the Irish banks?

Bank of Ireland

As mentioned above, Bank of Ireland transferred its UK banking operation into a new UK subsidiary - Bank of Ireland (UK) plc - on November 1. This means its savers are covered by the UK FSCS compensation scheme.

That protection applies to customers of its UK banking operation. Irish customers - those with actual Irish accounts - will still fall under the Irish compensation cover.

Anglo Irish bank has effectively been nationalised, so the Irish Government stands 100% behind it.

Irish banks, including Anglo Irish, essentially have unlimited savings compensation as the Irish Government has said since 2008 that it will stand 100% behind savers' deposits.

This was due to run out at the end of September but has been extended to the end of the year.

However, this protection remains dependent upon the overall Irish economy and is reliant on the country remaining solvent.

There may be plenty of speculation that the Irish economy is on the brink of collapse, after its borrowing costs soared, but being an EU member it is unlikely Ireland will default on its debts or face an Iceland scenario. The possibility, however remote, may worry some savers though.

Allied Irish Bank does belong to the FSCS as it has a small High Street presence in the UK, and so enjoys the same protection as UK-based, and UK-authorised banks.

Can you trust Irish compensation?

Essentially, Ireland's 100% savings guarantee is as strong as the country itself. Savers must make their own mind up on this position and decide what to do with their cash accordingly.

But with Irish banks - including Post Office owner, Bank of Ireland - looking so shaky, savers must also ask themselves if getting a tiny bit more interest is worth the hassle of potentially needing to claim compensation.

Some experts doubt whether the Irish scheme would have sufficient cash to pay out in the event of a bank default. Even if it does, savers should be wary of taking risks, especially if better rates can be found elsewhere with traditional British banks and building societies.

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The market's alarm bell for Ireland

This chart reflects the fear of international markets. The yield on Irish government bonds is the amount of interest investors want to be rewarded with for the risk of lending money to Ireland.

As the chart shows, this risk premium has leapt in recent weeks, far higher than its peak when the Greek debt crisis kicked off in April. Its previous high was 5.85% on 7 May. Markets are pricing in a far greater chance that Ireland will default on repaying these bonds.